Trademarks apply protection of US IPR to conduct outside of the US—it’s an exception to the presumption against extraterritoriality

As intellectual property has given heightened attention as a valuable business asset, the claims for the protection of U.S. intellectual [*412] property rights outside the United States have increased. 17 In some field of laws, such as admiralty, antitrust, securities, and trademark laws, courts have applied U.S. law to conduct that occurred outside of the United States. 18 Nonetheless, courts generally presume not to apply U.S. law beyond U.S. borders. 19 This presumption is called the "presumption against extraterritoriality" 20 This section will discuss the presumption against extraterritoriality with a particular focus on intellectual property laws.

A. Courts Generally Employ the Presumption Against Extraterritoriality in Federal Law.

Congress has the power to legislate extraterritorially, but congressional intent is often unclear. 21 Since the early 1800s, courts have employed the presumption against extraterritorial application of U.S. law to guide the construction of ambiguous statutes as to their geographic scope. 22 Courts have used the presumption to limit the reach of federal statutes within U.S. territory. In Equal Employment Opportunity Commission v. Arabian American Oil Co., the Supreme Court reaffirmed that U.S. law is presumed to have no extraterritorial effect. 23 Courts can overcome the presumption if they find a clear congressional intent to apply the law extraterritorially, such as a clear statement in the language of the statute itself. 24

The Supreme Court decisions reveal at least five rationales for the presumption: international law, international comity, choice-of-law principles, congressional intent, and separation of powers. 25 First, the international law justification is that under customary international law, some limitations are imposed on the application of a country's law to persons or activities foreign to it. 26 Second, international comity theory justifies the presumption by describing it as a limitation to prevent unintended conflicts with foreign laws and nations. 27 Third, the presumption is consistent with the early domestic choice-of-law principles that apply the law of the place where wrongful conduct occurred. 28 Fourth, assuming the assertion that "Congress generally legislates with domestic conditions in mind," the presumption is justified to serve this generally applicable Congressional intent. 29 Finally, the presumption is justified by the separation of powers doctrine that sets forth the theory that authority over foreign affairs is exclusively vested in the legislative and executive branches, rather than the judicial branch. 30 This is because the judicial branch lacks competence and authority to adjudicate on foreign issues. 31

The Supreme Court stated that the presumption applies "regardless of whether [*413] there is a risk of conflict between the American statute and a foreign law." 32 Recently, the Supreme Court increasingly applies the presumption more rigidly to cases with foreign elements. 33

Critics of the presumption contend that the international law justification is no longer valid because extraterritorial application of national law under certain circumstances is better accepted now in the international community. 34 Critics, therefore, argue that the rationale does not support the presumption in the modern era. 35 The presumption, however, should be valid because other justifications for the presumption are still valid.

Although courts generally restrain the extraterritorial application of federal law under the presumption, they rarely employ the presumption when applying state law to foreign conduct as long as some connections between the state and the case are found. 36 This pattern of court's practice will be discussed more in the section UI.A.2.

B. Patent and Copyright Laws Follow the Presumption, but Trademark Law Overcomes the Presumption.

Practitioners and scholars have disputed the extraterritorial scope of patent, copyright, and trademark laws. 37 Although each intellectual property law is generally designed to protect the owner's right, its extraterritorial scope is different. Patent law and copyright laws follow the presumption against extraterritoriality. 38 According to the Patent Act adopted in 1952, the scope of patent rights is limited to the U.S. territory. 39 The language of the Act specifically confines the scope of the patent owners' rights to exclude others within the United States. 40 In Microsoft Corp. v. AT&T (2007), the Supreme Court continually adhered to the strict view of a patent's terrestrial limits. 41 Therefore, inventors need to find recourses in the country where the infringement of the patent occurred. 42

In three situations, however, courts apply patent law extra territorially. 43 First, under 35 U.S.C. § 271(f), the doctrines of induced and contributory infringement, conduct abroad constitutes an infringement of U.S. patent law if active inducement or contribution to infringement is shown. 44 Second, under 35 U.S.C. § 271(g), importation, offer to sell, or use of the product made abroad by a U.S. process patent constitutes an infringement of U.S. patent law unless the product is materially changed by a subsequent process or is a trivial and nonessential component of another product. 45 Third, recoverable profits include the [*414] profits from foreign sales of the invention as long as the patent is infringed in the United States. 46

Unlike the patent statutes, no language in the copyright statute suggests to limit its geographic scope to the U.S. territories. 47 Nevertheless, courts have limited U.S. copyright law within U.S. borders and, thus, have only applied the law to conduct that takes place in the United States. 48 As in patent law, there are exceptions to the presumption, such as contributory infringement and extraterritorial profits. 49 The protection of copyright in the global market has been resolved by treaties. 50 Many countries protect foreign works under international copyright treaties and conventions such as the Berne Convention for the Protection of Literary and Artistic Works ("Berne Convention") and the Universal Copyright Convention ("UCC"). 51

Unlike patent and copyright laws, trademark law is applied to conduct that occurred abroad. 52 Steele v. Bulova Watch Co. significantly contributed to this departure from other IP laws. 53 In Steele, the Supreme Court held that the Lanham Act applied to the defendant's conduct that mainly occurred outside of the United States. 54 After Steele, most courts adopted three-step balancing test asking: 1) the effects of the defendant's conduct on U.S. commerce, 2) the citizenship of the defendant, and 3) the likelihood of a conflict between U.S. law and foreign law. 55 Under this test, any conduct which has a significant effect on U.S. commerce can be regulated by U.S. courts under the Lanham Act, even if the conduct took place overseas. 56